You'll need to provide a variety of information before the underwriting process can begin. Below is a comprehensive list of items required.

The faster you submit all the needed information and paperwork, the more quickly your mortgage application will move. If you're asking for loan pre-approval, you'll be that much closer to serious home shopping, mortgage in hand. If you've applied for your mortgage after making a purchase offer, a fast mortgage approval will increase your chances of getting to settlement before your interest-rate lock (if you have one) expires.

Here is a standard list of items for which you should be prepared to provide information or documents. Other information may be requested, depending on your circumstances.

»   Current pay stub(s) verifying 30 days of income and year-to-date income, including any overtime, commission
or bonus income.

»   W-2 forms for all employers covering the last two (2) years.

»   Signed copies of personal federal tax returns with all schedules for the last two (2) years.

»   If you are self-employed, provide a copy of Corporate or Partnership tax returns for the last two (2) years, include all schedules and signed by a company officer.

»   If you are self-employed, provide copies of your balance sheet for the last two (2) years.

»   If you are self-employed, provide a copy of your Profit and Loss Financial Statement through the most recent quarter/month.

»   Copy of your most recent Social Security Award Letters (if applicable).

»   Copy of your most recent Pension/Retirement check, or if direct deposited, a copy of your bank statement that shows the deposit source and amount (if applicable).

»   Most recent copy of your Disability Award Letter (if applicable).

»   Copy of divorce decree (if applicable).

»   Complete bank statements (for all accounts), or any other asset verification, covering the last two (2) months.If you only receive quarterly statements,the most recent one will be fine.* Please make sure to include ALL pages of the statements .They also require your name and address be on the forms ( internet print outs sometimes do not have that info)

»   Explanation Letter (for late payments, collections, etc.)

»   Copy of Drivers License for all borrowers

The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), administers various mortgage loan programs. Below are a few benefits of the program.
1. Benefits:
1. There are no income limits on FHA loans.
2. FHA offers more relaxed credit quality, income, and asset requirements.
3. You can use a non-owner occupant as a co-borrower. In other words, your co-borrower doesn't have to live in the home
with you.
4. Basic FHA Loans allow you to purchase a home with as little as a 3.5% down payment. In many cases the down payment
can come from a gift by a relative .
5. The Federal Housing Administration (FHA) does not make the loan. It only insures the loan made by approved lenders.

Warning:
The mortgage insurance premium (monthly MIP) paid on an FHA loans can be higher than on standard (conventional)
financing. They also have an upfront mortgage Insurance premium. That amount is 2.25% of the loan amount. This is
usually financed in and added on top of the mortgage applying for. This goes directly to FHA to ensure they have money to
insure future loans.

The VA Loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. Lenders generally limit the maximum VA loan amount.
The U.S. Department of Veterans Affairs does not make loans. It guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue a certificate of eligibility to be used in applying for a VA loan.
VA-guaranteed loans are obtained by making application to private lending institutions.
Benfits.
No down payment.
Funding fee ( equivalent to FHA’s up front mortgage Ins) is only 2.15 % of the loan amount.
Funding fee can be waived if the veteran is 10% or more disabled from the military.
No monthly Mortgage Insurance ( FHA has up front Mortgage Ins and monthly Mortgage Ins)

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with no down payment.
Similar to Va above ,these loans have no monthly mortgage Ins which helps you qualify for more of a home and keeps your payment down.
Benefits
No down payment
Can finance closing costs into the loan ( if appraisal comes in high enough)
No monthly Mortgage Insurance
Low up front Mortgage Insurance, only 2.041% of the loan amount.

** Cons

Property must be in a “designated “ Rural area. Please contact me to see if your home falls within one of these areas.
USDA has income limits., San Diego County is 95,000 for a family of four (annual gross income). All income in the family is counted .Higher limits are available with more than 4 family members.
This program gets Congressional money set aside for insuring loans. Every year the program gets exhausted around March to April and more money has to be requested to replenish the fund.
Home cannot have a swimming pool.

A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate.
These loans require a higher down payment 10 to 20 %.They have no up front mortgage insurance but may have (PMI) Private mortgage insurance in the monthly payment if you put down less than 20% .They apply for monthly mortgage insurance through a private insurer to cover them in case of default.

Each loan type has its own maximum loan limits, please consult me to determine the best loan for your specific situation.

HOUSE HUNTING TIP: Before you ask the seller to credit you money at closing, check with me before to find out what restrictions the banks may have regarding seller credits. Usually, lenders will only allow a credit for up to 3 percent of the purchase price. I also can give you a more detailed amount on how much specifically to ask for. Any money you do not use, goes back to the seller at closing. It’s important to come as close as we can, especially if you raised your offer to get the credit.

HOUSE HUNTING TIP: It's impossible to time the real estate market, so it's better to make your home buying decision on factors other than whether you think the market will peak or dip. You can't know this with certainty except through hindsight.

Q. What is the credit?
A. The first-time homebuyer credit is a tax credit for individuals and couples who purchase a new home after April 8, 2008, and before May 1, 2010. There are several versions of the credit depending upon when the home was purchased:

• For homes purchased in 2008, the credit, with some exceptions, must be repaid and takes the form of a $7,500 interest-free loan.
• For homes purchased in 2009 prior to November 7, the credit is for a maximum of $8,000 and, with some exceptions, does not have to be repaid, but it's only for new home owners who have not owned a home in the prior three years.
• Beginning November 7, 2009, an additional category of new homebuyers, long-time residents (who owned their own homes), was added. The credit for this group is a maximum of $6,500, which, with some exceptions, does not have to be repaid. (1/27/10)  

Q. How much is the credit?
A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009 or early 2010) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more ($80,000 in 2009 or early 2010). Long-time homeowners who buy a replacement home after Nov. 6, 2009, or in early 2010 may qualify for a credit of up to $6,500, or $3,250 for a married person filing a separate return. (11/19/09)
Q. Which home purchases qualify for the first-time homebuyer credit?
A. Any home purchased as your principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before May 1, 2010 (with closing to take place before July 1), to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.
For homes purchased after April 28, 2008, and before November 7, 2009, taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. For homes purchased after November 6, 2009, long-time residents can also get the credit under a special rule for a qualifying replacement home. To qualify, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you buy your new principal residence.
If you made an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return. For an eligible purchase in 2010, you can choose to claim the credit on either your 2009 or 2010 return. (1/27/09)
Q. If a taxpayer purchases a mobile home (manufactured home) with land and qualifies for the credit, is the amount of the credit based on the combined cost of the home and land?
A. Yes. The first-time homebuyer credit is ten percent of the purchase price of a principal residence. The total purchase price (mobile home and land) is used to determine the amount of the first-time homebuyer credit.
Q. Is a taxpayer who purchases a mobile home and places the home on leased land eligible for the first-time homebuyer credit?
A. Yes. A mobile home may qualify as a principal residence and it is not necessary that the taxpayer own the land to qualify for the first-time homebuyer credit.
Q. Can a taxpayer who purchases a travel trailer qualify for the credit?
A. A travel trailer that is affixed to land may qualify as a principal residence.   
Q. Can an individual who has lived in an RV qualify for the credit?
A.  For purposes of the first-time homebuyer credit, an RV with a built-in motor is personal property that is not affixed to land and does not qualify as a principal residence. Accordingly, someone who has owned and lived in an RV within the past three years may still qualify as a first-time homebuyer.
Q. Can I apply for the credit if I bought a vacation home or rental property?
A. No. Vacation homes and rental property do not qualify for this credit.
Q. Who is considered to be a first-time homebuyer?
A. Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time homebuyers. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
In addition, under a special rule, long-time homeowners who buy a replacement home after Nov. 6, 2009. or in early 2010 can also qualify. To qualify as a long-time resident, you must have owned and used the same home as your principal residence for at least five consecutive years of the eight-year period ending on the date you by your new principal residence. For an eligible taxpayer who, for example, bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (1/27/10)
Q. Can a dependent on someone else’s tax return claim the first time homebuyer credit if they otherwise qualify?
A. Different rules apply depending upon whether a dependent buys a home after Nov. 6, 2009, or on or before that date. Dependents are not eligible to claim the credit on any purchase after Nov. 6, 2009. However, a dependent who buys a home on or before Nov. 6, 2009 may qualify for the credit. (11/19/09) 
Q. Can a minor buy a home and claim the credit?
A. Usually, no. However, different rules apply to purchases after Nov. 6, 2009, and those on or before that date.
Minors are generally barred from claiming the credit on home purchases after Nov. 6, 2009. To qualify for the credit, a purchaser must be at least 18 years of age on the date of purchase. For a married couple, only one spouse must meet this age requirement. A dependent is not eligible for the credit, regardless of age.
For purchases on or before Nov. 6, 2009, the tax law does not bar a minor from buying a home and claiming the credit. However, taxpayers who do not otherwise qualify for the credit do not become eligible for the credit simply by using a minor child’s name. In addition, under state law, children under the age of 18 generally are not bound by any contract they sign and cannot be required to comply with the terms of the contract. Thus, it is extremely unlikely that a seller of a home, or a lender if financing is required, would enter into a bona fide sale of a home to a child. Merely using the child’s name to purchase a home does not qualify the child for the credit if, in substance, the child is not a bona fide purchaser of a home. (11/19/09)
Q. When do I have to buy a new home to get the credit?
A. The credit is available for eligible home purchases after April 8, 2008. You must enter into a binding contract to buy the home before May 1, 2010 and close before July 1, 2010, in order to obtain the credit. For a home you construct, the purchase date is considered to be the date you first occupy the home. (11/19/09)

Q. How do I apply for the credit?
A. The credit is claimed on IRS Form 5405, First-Time Homebuyer Credit (revised December 2009), and filed with your 2008, 2009 or 2010 federal income tax return. If you have already filed a 2008 or a 2009 tax return without claiming the credit, you can amend your return to claim the credit using Form 1040X with the December 2009 Form 5405 attached. Certain additional supporting documentation will be required when filing claim for the credit with your 2009 or 2010 return or amended return. (1/27/10)
Q. I submitted an amended 2008 return for the first-time homebuyer credit more than eight weeks ago. How long will it take the IRS to process my  return?    
A. The normal processing time for amended returns is approximately 8-12 weeks. Recent changes to the tax law have resulted and will continue to result in larger than normal volumes of amended returns. This increased volume has increased our processing time to 12-16 weeks. It is not necessary for you to follow-up with the IRS regarding your amended return if you are within these time frames. (11/23/09)  
Q. Are there income limits?
A. Yes. The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). Different income limits apply to purchases on or before Nov. 6, 2009 and those after that date. 
For purchases on or before Nov. 6, 2009, for a  married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
For purchases after Nov. 6, 2009, for a married couple filing a joint return, the phase-out range is $225,000 to $245,000. For other taxpayers, the phase-out range is $125,000 to $145,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $225,000 or less and for other taxpayers whose MAGI is $125,000 or less. (11/19/09)
Q. Can a taxpayer claim the first-time homebuyer credit after entering into a contract for the purchase of a residence but before closing on the purchase?
 
A. No. Taxpayers cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase. (7/2/09)

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?

A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (7/2/09)
Q. I purchased a home that qualifies for the first-time homebuyer credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence?
A. Yes, if you meet all first-time homebuyer eligibility requirements. See Form 5405, First-Time Homebuyer Credit, for more details.
Q. I purchased a duplex home with two separate dwelling units. I will live in one dwelling and will rent out the other dwelling unit and report the rental income on Schedule E. May I qualify for the first-time homebuyer credit, and what amount do I use for the purchase price to determine the amount of the credit? 
A. Yes, you may qualify for the credit for the dwelling unit that you use as your principal residence. To determine the amount of your credit, you must allocate the purchase price of the duplex between the two separate dwelling units. You may not use the entire purchase price of the duplex to determine the amount of your credit.
Q. If two unmarried people buy a house together, how do they determine how much each may take of the credit?
A. IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.
Q. I am a single co-owner of a home. How do I get this credit?
A. Depending on the year of purchase, you will claim the credit on your 2008, 2009 or 2010 federal income tax return. (11/19/09)
Q. I don’t owe taxes and/or my income is exempt from tax and I do not have a filing requirement. Do I qualify for the credit? 
A. The credit is fully refundable and, if you qualify as a first-time homebuyer, having tax-exempt income will not preclude eligibility. Although there are maximum income limits for qualifying first-time homebuyers, there are no minimum income criteria. Thus, someone with no taxable income who qualifies as a first-time homebuyer may file for the sole purpose of claiming the credit for a refund.
Q. Does the first-time homebuyer credit apply to homes located in the U.S. Territories?
A. No. 
Q. Would I be considered a first time homebuyer if I owned a principal residence outside of the United States within the previous three years?
A. Yes. A taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States.
Q. If qualified, are homebuyers required to claim the first-time homebuyer credit?
A. No.
Q. Who cannot take the credit?
A. If any of the following describe you, you cannot take the credit, even if you buy a new home:

• Your income exceeds the phase-out range.
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You are a nonresident alien.

Also, if the home is purchased after November 6, 2009, and you are a minor, you are generally barred from claiming the credit. To qualify for the credit, a purchaser must be at least 18 years of age on the date of purchase. For a married couple, only one spouse must meet this age requirement. A dependent is not eligible for the credit, regardless of age. For more information on this, please see the Q and A "Can a minor buy a home and claim the credit?" (1/27/10)
Q. Does previously inheriting a home and living in it automatically disqualify me as a first-time homebuyer if I buy a different home on or before Nov. 6, 2009?
A. Yes, an ownership interest in a prior principal residence would bar you from being considered a first-time homebuyer. As long as you owned and used the prior home as your principal residence, you are not a first-time homebuyer. There is no exception for taxpayers who did not buy their prior residences. (11/19/09) 
Q. If I claim the first-time homebuyer credit in 2009 and stop using the property as my main home before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?
A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. See Form 5405 and its instructions about repayment of the credit. (5/6/09, 1/27/10)
Q. If a person does not actually make the payments on a home that’s their principal residence, but the deed and mortgage documents are in their name, can they be considered a first-time homebuyer?  
A. Yes. If a taxpayer purchases a home to be used as a principal residence from an unrelated person and has not owned a home within the previous 36 months, the taxpayer is eligible for the first-time homebuyer credit regardless of who makes the mortgage payment. (5/6/09)
Q. Do taxpayers affected by Hurricane Katrina or other disasters qualify as first-time homebuyers if their principal residence (i.e. main home) became uninhabitable more than three years ago and they have not formally disposed of the uninhabitable home or purchased or built a new home in the interim?  

This section of the website is here to help you understand what the FHA does and does not require in regard to the condition of a property being purchased using an FHA loan.  The guidelines have changed in this area as the FHA has loosened up on its property requirements. As a result there are many different “ideas” floating around about what the FHA's minimum property standards are. I want to make sure that we present the facts to you.

REPAIRS:

Section 1103 – “FHA has shifted from its historical emphasis on the repair of minor property deficiencies and now only requires repairs for those property conditions that rise above the level of cosmetic defects or normal wear and tear.”

AS IS:

Section 1103 – “FHA now permits “as-is” appraisals [on property] when minor property deficiencies, which generally result from deferred maintenance and normal wear and tear, do not affect the safety of the occupants or the security and the soundness of the property. FHA no longer requires repairs for these types of minor cosmetic deficiencies.”

Examples of conditions not necessitating repair include but are not limited to:

   - Missing Handrails
   - Cracked or damaged exit doors that are otherwise operable
   - Cracked window glass
   - Defective paint surfaces in homes constructed post 1978
   - Minor plumbing leaks (such as leaky faucets)
   - Defective floor finish/covering
   - Evidence of previous (non-active) Wood Destroying 
     Insect/Organism damage
   - Rotten or worn-out countertops - Damaged plaster,
     sheetrockor other wall and ceiling materials in homes
   - Poor workmanship
   - Trip hazards
   - Crawl space with debris
   - Lack of all-weather driveway surface

Examples of property conditions that the FHA will require repair include but are not limited to:

   - Inadequate access/egress from bedrooms to exterior of 
     homes
   - Leaking or worn out roofs
   - Evidence of structural problems
   - Defective paint surfaces in homes constructed pre-1978
   - Defective exterior paint surfaces in homes post
   - 1978 where the finish is otherwise unprotected

"If the appraisal reports a potential property deficiency that may pose a threat to the safety of the occupants or the security and soundness of the property the lender will require an inspection of the condition to determine whether repairs are necessary to resolve the problem."

Examples of conditions that will continue to require inspections include but are not limited to:

   - Standing water against the foundation and/or excessively
     damp basements
   - Hazardous materials on the site or within the improvements 
   - Faulty or defective mechanical systems (electrical, plumbing 
     or heating)
   - Evidence of possible structural failure (e.g. settlement or  
     bulging foundation wall)

APPLIANCES:

FHA states that the property must have a “Space” for cooking.  There is no specific requirement as to how the food is to be cooked or stored.  So they do not have any special requirement for the type or presence of appliances.  However FHA does defer to local law to ensure that appliances meet local code regarding proper amperage.

FHA requires that if the property does have appliances they must be in working order.  If your clients are purchasing a home that contains appliances that do not work and the seller is not willing to fix, it would be best to ensure the removal of the non-working appliances prior to the appraisal.  This would be in compliance with FHA guidelines.   

AIR CONDITIONING (UTILITY):

FHA defines the Heating/Air Conditioning unit as a utility and NOT an appliance so different rules apply.  FHA only requires that the heating unit works and is able to heat the house.  They do not require that the A/C unit work.   Apparently the individuals that wrote these rules have never visited Phoenix in the summertime….or spring….or fall. 

POOL:

FHA requires a home with a pool to have a working pool pump that is able to circulate the pool water.  They also require that the pool has enough water in it so that the pump can effectively circulate the pool water. 

FHA does not specifically test the water nor does it have a certain requirement as to the clarity to the water.  They do however open up a gray area by stating that the level and quality of the water in the pool must not pose a health or safety risk.  I.E. no mosquito infestations or algae!!  J 

INSPECTION REQUIREMENTS:

Section 1103 – "FHA no longer mandates automatic inspections for the following items and/or conditions in existing properties:"

   - Wood Destroying Insects/Organisms – TERMITES
   - Well (individual water system)
   - Septic
   - Flat and/or unobservable roof

The basic rule that FHA abides by is that the property must be habitable and safe for the occupants. The FHA no longer requires many repairs that they used to. They have standardized their appraisal requirements to include that only conditions that affect the structural soundness of a property and the safety of the occupants be repaired. In addition FHA does NOT require any inspections for termites, wells, septic systems and flat or unobservable roofs. They also do not generally require any special inspections other than an appraisal by an FHA licensed appraiser.


In accordance with Section 326 of the USA PATRIOT Act of 2000, San Vicente mortgage is required to obtain a copy of the documents used in identifying our new account customers. This notice is being provided to you for adequate notice given under this act.’
‘Please note that the information above is not intended to be any decision of, or commitment to, any loan type or amount of loan for which one may qualify with any financial institution. The information is not intended to extend any legal, tax, or financial advice. The accuracy of the information contained in this advertisement is not guaranteed. Please consult a loan professional to learn more about your eligibility for and availability of a particular loan product.

WHAT IS TAX DEDUCTIBLE ON MY HOME PURCHASE? … AND WHEN can I take the deduction?

Here is a list to help you determine what you are able to write off this year in relation to your new home purchase or refinance. Maximize your assets and minimize your liabilities by understanding what you are able to deduct from your taxable income simply because you own a home!

1. Home Acquisition Points – Both the origination and discount points with no regard to who paid them (you or your seller – you get the tax break either way!)
   a. They can be deducted in the year they are paid

2. Home Improvement Points – (the points paid on a home improvement cash out transaction)
   a. They can be deducted in the year they are paid

3. Refinance Points –
   a. On a refinance, points are deductible on an amortized
       scheduled over the life of the loan .
   b. When you refinance, you may also deduct any remaining
       points from a previous refinance in full in the year of the
       new refinance

4. Prorated Real Estate Property Taxes -
   a. They are deducted in the year paid

5. Mortgage Interest -
   a. Deducting Mortgage Interest

The interest you pay on a home mortgage is usually tax-deductible. You are allowed to deduct interest on multiple mortgages, as long as they add up to less than $1 million. The one criteria being that the money was used for buying, building or improving a home.
Every year, you should receive a “Form 1098” from your lender which details how much mortgage interest you paid. To claim this deduction, you need to fill out “Schedule A”, under “itemized deductions” to record your interest deduction.
Home mortgage interest deductions can also include late payment charges and pre-payment penalties. The only requirement is that they were not for a specific service received in connection with your home loan.
 
6. Pre-Paid Property Taxes and Mortgage Interest (from the 
     prepaid section on your settlement statement) -
   a. They are deducted in the year they are paid

7. Any prepayment penalties incurred -
   a. Deducted in the year they are paid or “incurred”

8. Mortgage Insurance –
   a. Mortgage Insurance on loans originated on or after January
       1, 2007 is now eligible for a tax deduction. The tax
       deduction is related to income levels, so please be sure to
       check with your CPA.

9. Home Construction Loan Interest –

   a. Deducted in the year it is paid